Revision under section 263 fails where taxing surrendered income under amended section 115BBE is debatable and two views are possible.

Section 263 revision cannot be invoked merely because the Principal Commissioner prefers a different view on taxing surrendered income under the amended section 115BBE. The article notes that applicability of the amended rate was treated as a highly debatable issue, especially where the assessment order did not invoke sections 68 to 69D to trigger section 115BBE. It reiterates that revision requires both error and prejudice to the Revenue, and that a debatable interpretation or a mere case of inadequate inquiry does not justify substitution of one possible view for another. On that basis, the revisionary assumption of jurisdiction was held unsustainable.

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Issues: Whether the Principal Commissioner could invoke revisionary jurisdiction under section 263 of the Income-tax Act, 1961, to apply the amended rate under section 115BBE to surrendered income and revise the assessment on the footing that the assessment order was erroneous and prejudicial to the interests of the Revenue.

Analysis: The revision was founded on the view that the surrendered income ought to have been taxed at 60% under the amended section 115BBE rather than at normal slab rates. The applicability of the amended provision to the facts was held to be a highly debatable issue, especially since the assessment order did not invoke sections 68 to 69D to attract section 115BBE. The settled law on section 263 requires coexistence of both conditions, namely that the order must be erroneous and also prejudicial to the interests of the Revenue. Where two views are possible, or where the matter turns on debatable interpretation, revision cannot be sustained. The distinction between lack of inquiry and inadequate inquiry was also applied, and it was found that the assessment could not be revised merely because a different view was preferred.

Conclusion: The assumption of jurisdiction under section 263 was invalid and the revision order was not sustainable.

Ratio Decidendi: Revision under section 263 can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the Revenue, and it cannot be invoked on a debatable issue or to substitute one possible view for another.

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